1 Dec 2017
Crude Oil

Crude prices ticked up higher after the OPEC announcement regarding extension of production cuts. The Jan Brent future, which expires today, closed 47 cents higher at $63.57 /bbl.  The Feb future however settled just 10 cents higher at $ 62.63 / bbl. WTI settled at $57.40 /bbl., also gaining 10 cents on the day.

Although the 9-month extension is in line with, if not slightly more bullish than market expectation, oil prices sold off from intraday highs at the announcement of the final statement. This is because most of what was announced was expected and factored into the prices. The new elements, if any, were that Libya and Nigeria would cap production but, since it did not involve any production cuts, that would not provide the market any fillip. 

The bearish factor, very carefully worded, is that the group would review in June 2018 whether it is necessary to loosen the cuts because the market is too tight. This takes care of the Russian desire to move early on production expansion. 
 
There are many reasons that producers would want to relax cuts, especially were prices to stay higher. For one, at these prices, shale oil product would be economically far more feasible and we could see a spurt in the rise in production. This, in turn, would lead to a fight for market share. Secondly, high prices could impact demand. Last, but not least, it would be interesting to see how Russia and Saudi Arabia compete for market share after production curbs are released.
Naphtha

The physical Asian naphtha crack settled even lower at yesterday $119.75 /MT yesterday as trader apparently are seeing more material than was previously thought available. The build in US gasoline stocks would have added to concerns since the implied reduction in demand would free up naphtha used as gasoline blend stock for sale. 

The December crack has dropped to $ 3.80 /bbl. In our OPD on Wednesday, we had recommended hedging at a value of $ 4.75 /bbl.

Gasoline

The Gasoline physical crack continued to weaken and settled at a month low of $9.60 /bbl. While Singapore light distillate stocks fell marginally by 180 Kb last week, this may not be sufficient to bolster the crack. Hence, it may  

The December 92 Ron paper crack, nevertheless, is valued higher at $ 12.35 /bbl.

Given the way the crack is settling, we would recommend selling the crack as a trading position.

Distillates

The Asian gasoil market was propped by a drop of 697 kb in distillate stocks in Singapore (a six week low); coupled with continued buying by players like Winson Oil

The December 0.05% Gasoil crack however, is valued much lower today at $12.25 /bbl. The regrade is unchanged at $ 0.90 /bbl.

Fuel Oil

Fuel Oil oil stocks in Singapore ended last week lower by 450 kb . This is the fourth straight decline in stocks which are now at an eight week low. The crack, though has not responded particularly and is still at – $ 2.90 for December. The visco spread continues to be valued at $ 0.65 /bbl.

About this blog

This blog post attempts to give a top level summary of the Singapore market goings on to a person who seeks to obtain a directional sense of the market on a daily basis.

Disclaimer : All the views are the author’s personal views. These do not constitute an advice to buy or sell any commodity

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